Sunday, July 08, 2012

Australia is set to do it again. BusinessDay's half-yearly economic survey has found our private sector economists believe the country will grind its way through the 2012-13 financial year to record solid growth, despite risks of Europe's problems deadening the world economy.

Our economists see Australia broadly continuing along its present path, dodging any significant fallout from the eurozone crisis, but divided into two economies travelling at very different speeds. Unemployment will grow.

The panel is hopeful, though far from certain, that the biggest threat to global growth the potential breakup of the eurozone will be averted, or failing that, managed in a way that avoids sparking what Monash University's Jakob Madsen terms "irrational investor behaviour".

Whether Greece remains in the euro or not, most of the panel expects Australia to be largely unaffected by Europe's crisis. Any impact will be swamped by the strength of the mining construction boom, and continued demand for minerals from China and India.

On average, our 22 forecasters predict Australia's gross domestic product will grow by 2.9 per cent in the coming 12 months, within the 2.5 to 3.5 per cent range forecast by the Reserve Bank, although slightly less than the budget forecast of 3.25 per cent as the year average.

They expect global output in 2012 will expand by 3.2 per cent, a bit less than the 3.5 per cent forecast in April by the International Monetary Fund. But many in the panel see global confidence returning in 2013, lifting prices for Australia's mining exports, and reversing the slide in the terms of trade.

Most disregard the forecasts of a further fall in commodity prices, and signals by BHP and Rio that mining projects could be put on hold. They say mining construction work for the next year or two is now locked in, and while prices may have peaked, the peak in mining investment is several years away...